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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
o Preliminary Proxy Statement | ||||
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||||
þ Definitive Proxy Statement | ||||
o Definitive Additional Materials | ||||
o Soliciting Material Pursuant to §240.14a-12 |
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Sincerely yours, | |
Eli Harari | |
President and Chief Executive Officer |
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1. To elect seven (7) Directors to serve for the ensuing year or until their respective successors are duly elected and qualified. The nominees are Dr. Eli Harari, Irwin Federman, Steven J. Gomo, Eddy W. Hartenstein, Catherine P. Lego, Michael E. Marks and Dr. James D. Meindl. | |
2. To approve amendments that would increase the number of authorized shares under the SanDisk Corporation 2005 Incentive Plan by an additional 15,000,000 shares and give the Company the flexibility to grant cash bonus opportunities under the plan intended to satisfy the requirements for deductibility under applicable tax law. | |
3. To approve an amendment to the Company’s Certificate of Incorporation to increase the Company’s authorized Common Stock from 400,000,000 shares to 800,000,000 shares. | |
4. To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2006. | |
5. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
By Order of the Board of Directors, | |
Eli Harari | |
President and Chief Executive Officer |
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First Elected/Appointed | ||||||||||
Name | Position(s) with the Company | Age | as a Director | |||||||
Dr. Eli Harari(1) | President, Chief Executive Officer and Director(6) | 60 | 1988 | |||||||
Irwin Federman(2) | Chairman of the Board and Director(7) | 70 | 1988 | |||||||
Steven J. Gomo(2) | Director | 54 | 2005 | |||||||
Eddy W. Hartenstein | Director | 55 | 2005 | |||||||
Catherine P. Lego(2) | Director | 49 | 2004 | (5) | ||||||
Michael E. Marks(3)(4) | Director | 55 | 2003 | |||||||
Dr. James D. Meindl(3) | Director | 72 | 1989 |
(1) | Member of the Special Option Committee |
(2) | Member of the Audit Committee |
(3) | Member of the Compensation Committee |
(4) | Member of the Nominating and Governance Committee |
(5) | Ms. Lego served as a Director of the Company from 1989 to 2002 and returned to the Board of Directors in May 2004. |
(6) | Effective June 1, 2006, Dr. Harari will be appointed as Chairman of the Board of Directors. Additionally, effective June 1, 2006, Dr. Harari will relinquish his position as President of the Company while maintaining his position as Chief Executive Officer, and Sanjay Mehrotra, the Company’s Executive Vice President and Chief Operating Officer, will assume the role of President while maintaining his position as Chief Operating Officer. |
(7) | Effective June 1, 2006, Mr. Federman will be appointed as Vice Chairman of the Board of Directors and Lead Independent Director. |
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Postal Mail |
Board of Directors | |
c/o Investor Relations | |
SanDisk Corporation | |
140 Caspian Court | |
Sunnyvale, CA 94089 |
Communications Intended for Non-Management Directors |
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Chairman of the Nominating and Governance Committee | |
SanDisk Corporation | |
140 Caspian Court | |
Sunnyvale, CA 94089 |
• | Reputation for integrity, strong moral character and adherence to high ethical standards. | |
• | Holds or has held a generally recognized position of leadership in the community and/or chosen field of endeavor, and has demonstrated high levels of accomplishment. | |
• | Demonstrated business acumen and experience, and ability to exercise sound business judgment in matters that relate to the current and long-term objectives of the Company. | |
• | Ability to read and understand basic financial statements and other financial information pertaining to the Company. | |
• | Commitment to understand the Company and its business, industry and strategic objectives. | |
• | Commitment and ability to regularly attend and participate in meetings of the Board of Directors, Board Committees and stockholders, number of other company boards on which the candidate serves and ability to generally fulfill all responsibilities as a Director of the Company. |
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• | Willingness to represent and act in the interests of all stockholders of the Company rather than the interests of a particular group. | |
• | Good health and ability to serve. | |
• | For prospective non-employee Directors, independence under SEC and applicable stock exchange rules, and the absence of any conflict of interest (whether due to a business or personal relationship) or legal impediment to, or restriction on, the nominee serving as a director. | |
• | Willingness to accept the nomination to serve as a Director of the Company. |
Other Factors for Potential Consideration |
• | Whether the prospective nominee will foster a diversity of skills and experiences. | |
• | Whether the nominee possesses the requisite education, training and experience to qualify as “financially literate” or as an “audit committee financial expert” under applicable SEC and stock exchange rules. | |
• | For incumbent Directors standing for re-election, the Nominating and Governance Committee will assess the incumbent Director’s performance during his or her term, including the number of meetings attended, level of participation, and overall contribution to the Company; the number of other company boards on which the individual serves, the composition of the Board at that time, and any changed circumstances affecting the individual Director which may bear on his or her ability to continue to serve on the Board. | |
• | Composition of Board and whether the prospective nominee will add to or complement the Board’s existing strengths. |
• | Outside Advisors. The Nominating and Governance Committee may engage a third-party search firm or other advisors to assist in identifying prospective nominees. | |
• | Nomination of Incumbent Directors. The re-nomination of existing Directors is not automatic, but is based on continuing qualification under the criteria set forth above and the Corporate Governance Principles of the Company. | |
• | Management Directors. The number of officers or employees of the Company serving at any time on the Board should be limited such that, at all times, a majority of the Directors is “independent” under applicable SEC and Nasdaq National Market rules. |
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Shares approved for future grant under the 2005 Plan on May 27, 2005 | 5,700,000 | |||
Shares that became available under the 2005 Plan pursuant to the cancellation or termination of awards under predecessor plans between May 27, 2005 and March 10, 2006 | 508,231 | |||
Awards granted under the 2005 Plan between May 27, 2005 and March 10, 2006, net of cancellations | 5,641,631 | |||
Remaining shares available for future grant under the 2005 Plan, as of March 10, 2006 | 566,600 |
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• | Should the exercise price of an option be paid in shares of the Company’s Common Stock, then the number of shares reserved for issuance under the 2005 Plan will be reduced by the gross number of shares for which that option is exercised, and not by the net number of new shares issued under the exercised option. | |
• | Should shares of Common Stock otherwise issuable under the 2005 Plan be withheld by the Company in satisfaction of the withholding taxes incurred in connection with the exercise of an option or stock appreciation right or the issuance or vesting of shares under the stock issuance program, then the number of shares of Common Stock available for issuance under the 2005 Plan will be reduced by the full number of shares issuable under the exercised option or stock appreciation right or the full number of shares issuable or vesting under the stock issuance program, calculated in each instance prior to any such share withholding. | |
• | Upon the exercise of any stock appreciation right granted under the 2005 Plan, the share reserve will be reduced by the gross number of shares as to which such stock appreciation right is exercised, and not by the net number of shares actually issued upon such exercise. |
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• | Tandem stock appreciation rights provide the holders with the rights to surrender their options for an appreciation distribution from the Company in an amount equal to the excess of (i) the fair market value of the vested shares of Common Stock subject to the surrendered option over (ii) the aggregate exercise price payable for those shares. | |
• | Stand-alone stock appreciation rights allow the holders to exercise those rights as to a specific number of shares of Common Stock and receive in exchange an appreciation distribution from the Company in an amount equal to the excess of (i) the fair market value of the shares of Common Stock as to which those rights are exercised over (ii) the aggregate base price in effect for those shares. The base price per share may not be less than the fair market value per share of Common Stock on the date the stand-alone stock appreciation right is granted, and the right may not have a term in excess of seven (7) years. |
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Number of | |||||||||
Shares | Weighted | ||||||||
Underlying | Average | ||||||||
Options | Exercise Price | ||||||||
Name and Position | Granted (#) | per Share ($) | |||||||
Named Executive Officers: | |||||||||
Eli Harari | 200,000 | (1) | 26.09 | ||||||
President & CEO | |||||||||
Sanjay Mehrotra | 100,000 | (2) | 59.04 | ||||||
Executive VP & COO | |||||||||
Judy Bruner | 80,000 | (3) | 59.04 | ||||||
Executive VP, Administration & CFO | |||||||||
Nelson Chan | 80,000 | (4) | 59.04 | ||||||
EVP, Consumer Products & Corp. Marketing | |||||||||
Yoram Cedar | 100,000 | (5) | 47.64 | ||||||
EVP, Handset Business & Corp. Engineering | |||||||||
All current executive officers as a group (6 persons)(6) | 760,000 | (6) | 45.00 | (6) | |||||
Directors: | |||||||||
Irwin Federman | 6,250 | 26.09 | |||||||
Catherine P. Lego | 6,250 | 26.09 | |||||||
Michael Marks | 6,250 | 26.09 | |||||||
James D. Meindl | 6,250 | 26.09 | |||||||
Alan F. Shugart | 6,250 | 26.09 | |||||||
Eddy W. Hartenstein | 25,000 | 49.60 | |||||||
Steven J. Gomo | 25,000 | 49.23 | |||||||
All current non-employee directors as a group (7 persons) | 81,250 | 40.44 | |||||||
All employees, including current officers who are not executive officers, as a group | 4,664,975 | 57.67 |
(1) | Consists of options for 200,000 shares granted on May 27, 2005 at an exercise price of $26.09. |
(2) | Consists of options for 100,000 shares granted on February 16, 2006 at an exercise price of $59.04. |
(3) | Consists of options for 80,000 shares granted on February 16, 2006 at an exercise price of $59.04. |
(4) | Consists of options for 80,000 shares granted on February 16, 2006 at an exercise price of $59.04. Excludes options for 2,300 shares granted on February 16, 2006 at an exercise price of $59.04 to Mr. Chan’s spouse, an employee of the Company. Mr. Chan disclaims beneficial ownership of the securities held by his spouse. |
(5) | Consists of options for 80,000 shares granted on September 23, 2005 at an exercise price of $44.79 and options for 20,000 shares granted on February 16, 2006 at an exercise price of $59.04. |
(6) | Includes options for 200,000 shares granted to Dr. Randhir Thakur, one of our executive officers, on September 27, 2005 at an exercise price of $44.32. |
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Number of Shares | |||||
Underlying | |||||
Restricted Stock | |||||
Name and Position | Units (#) | ||||
Named Executive Officers: | |||||
Eli Harari | 0 | ||||
President & CEO | |||||
Sanjay Mehrotra | 0 | ||||
Executive VP & COO | |||||
Judy Bruner | 0 | ||||
Executive VP, Administration & CFO | |||||
Nelson Chan | 0 | ||||
EVP, Consumer Products & Corp. Marketing | |||||
Yoram Cedar | 0 | ||||
EVP, Handset Business & Corp. Engineering | |||||
All current executive officers as a group (6 persons)(1) | 75,000 | (1) | |||
Directors: | |||||
Irwin Federman | 2,500 | ||||
Steven J. Gomo | 6,554 | ||||
Eddy W. Hartenstein | 6,134 | ||||
Catherine P. Lego | 2,500 | ||||
Michael Marks | 2,500 | ||||
James D. Meindl | 2,500 | ||||
Alan F. Shugart | 2,500 | ||||
All current non-employee directors as a group (7 persons) | 25,188 | ||||
All employees, including current officers who are not executive officers, as a group | 154,146 |
(1) | Includes 75,000 shares of our common stock subject to restricted stock unit awards made under the 2005 Plan to Dr. Randhir Thakur, one of our executive officers. |
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(i) Each outstanding option or stock appreciation right under the discretionary grant program will automatically accelerate in full upon a change in control, if that option or stock appreciation right is not assumed or otherwise continued in effect by the successor corporation or replaced with a cash retention program which preserves the spread existing on the unvested shares subject to the option or stock appreciation right (the excess of the fair market value of those shares over the exercise or base price payable for such shares) and provides for subsequent payout of that spread in accordance with the same vesting schedule in effect for those shares. | |
(ii) All unvested shares outstanding under the discretionary grant and stock issuance programs will immediately vest upon a change in control, except to the extent the Company’s repurchase rights with respect to those shares are to be assigned to the successor corporation or otherwise continued in effect. Each outstanding restricted stock unit or other stock-based award under the stock issuance program will vest as to the number of shares of the Company’s Common Stock subject to such unit or award upon the occurrence of a change in control, unless the unit or award is assumed by the successor corporation or otherwise continued in effect or is replaced with a cash retention program which preserves the fair market value of the underlying shares and provides for subsequent payout of that value in accordance with the same vesting schedule in effect for those shares. | |
(iii) The plan administrator will have complete discretion to grant one or more options or stock appreciation rights under the discretionary grant program which will vest and become exercisable for all the shares in the event the individual’s service with the Company or the successor entity is terminated (actually or constructively) within a designated period following a change in control transaction in which those options or stock appreciation rights are assumed or otherwise continued in effect. The vesting of outstanding shares and the vesting and issuance of the shares of Common Stock subject to outstanding restricted stock units or other stock-based awards under the stock issuance program may also be structured to accelerate upon similar terms and conditions. | |
(iv) The plan administrator will have the discretion to structure one or more option grants or stock appreciation rights under the discretionary grant program so that those options or stock appreciation rights will immediately vest upon a change in control, whether or not the options or stock appreciation rights are to be assumed or otherwise continued in effect. The plan administrator may also structure unvested stock issuances or restricted stock units or other share rights awards under the stock issuance program so that those issuances or awards will in all events vest immediately upon a change in control. | |
(v) A change in control will be deemed to occur in the event (a) the Company is acquired by merger or asset sale, (b) there occurs a stockholder-approved sale, transfer or other disposition (including in whole or in part through one or more licensing arrangements) of all or substantially all of the Company’s assets, or (c) there occurs any transaction or series of related transactions pursuant to which any person or group of related persons becomes directly or indirectly the beneficial owner of securities possessing (or convertible into or exercisable for securities possessing) more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Company’s stockholders. | |
(vi) The plan administrator will also have the discretionary authority to structure one or more outstanding options or stock appreciation rights under the discretionary grant program so that those |
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options or stock appreciation rights will, immediately prior to the effective date of a hostile take-over, vest and become exercisable as to all the shares of Common Stock at the time subject to those options or stock appreciation rights. In addition, the plan administrator will have the authority to structure one or more awards under the stock issuance program so that the shares of Common Stock subject to those awards will immediately vest upon the consummation of a hostile take-over. Alternatively, the plan administrator may condition such vesting acceleration upon the subsequent termination of the individual’s service within a designated period following the effective date of such hostile take-over. | |
(vii) A hostile take-over will be deemed to occur if (a) there is a change in the majority of the Company’s Board of Directors as a result of one or more contested elections for board membership or (b) securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are acquired pursuant to a hostile tender offer. |
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Incentive Options.No taxable income is recognized by the optionee at the time of the option grant, and no taxable income is recognized for regular tax purposes at the time the option is exercised, although taxable income may arise at that time for alternative minimum tax purposes. The optionee will recognize taxable income in the year in which the purchased shares are sold or otherwise made the subject of certain other dispositions. For Federal tax purposes, dispositions are divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two (2) years after the date the option for the shares involved in such sale or disposition is granted and more than one (1) year after the date the option is exercised for those shares. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition will result. | |
Upon a qualifying disposition, the optionee will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the purchased shares over (ii) the exercise price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of (i) the fair market value of those shares on the exercise date or (if less) the amount realized upon such sale or disposition over (ii) the exercise price paid for the shares will be taxable as ordinary income to the optionee. Any additional gain recognized upon the disposition will be a capital gain. |
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If the optionee makes a disqualifying disposition of the purchased shares, then the Company will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal to the amount of ordinary income recognized by the optionee as a result of the disposition. The Company will not be entitled to any income tax deduction if the optionee makes a qualifying disposition of the shares. | |
Non-Statutory Options.No taxable income is recognized by an optionee upon the grant of a non-statutory option. The optionee will in general recognize ordinary income, in the year in which the option is exercised, equal to the excess of the fair market value of the purchased shares on the exercise date over the exercise price paid for the shares, and the Company will be required to collect the withholding taxes applicable to such income from the optionee. | |
If the shares acquired upon exercise of the non-statutory option are unvested and subject to repurchase by the Company in the event of the optionee’s termination of service prior to vesting in those shares, then the optionee will not recognize any taxable income at the time of exercise but will have to report as ordinary income, as and when the Company’s repurchase right lapses, an amount equal to the excess of (i) the fair market value of the shares on the date the repurchase right lapses over (ii) the exercise price paid for the shares. The optionee may, however, elect under Section 83(b) of the Internal Revenue Code to include as ordinary income in the year of exercise of the option an amount equal to the excess of (i) the fair market value of the purchased shares on the exercise date over (ii) the exercise price paid for such shares. If the Section 83(b) election is made, the optionee will not recognize any additional income as and when the repurchase right lapses. | |
The Company will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the optionee with respect to the exercised non-statutory option. The deduction will in general be allowed for the Company’s taxable year in which such ordinary income is recognized by the optionee. |
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2005 | 2004 | |||||||
(a) Audit Fees | $ | 1,546,000 | $ | 1,355,000 | ||||
(b) Audit Related Fees | 101,000 | 221,000 | ||||||
(c) Tax Fees | 230,000 | 416,000 | ||||||
(d) All Other Fees | 5,000 | 30,000 |
(a) | Audit fees consist of professional services provided in connection with the audit of the Company’s financial statements and review of the Company’s quarterly financial statements. These audit fees also include professional services provided in connection with the annual audit of the Company’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, the audit of the Company’s employee benefit plan and other statutory audits of subsidiaries or affiliates of the Company. | |
(b) | Audit related fees consist primarily of accounting consultations, services provided in connection with regulatory filings, technical accounting guidance and other attestation services. | |
(c) | For fiscal years 2005 and 2004, tax fees principally included tax compliance fees, including expatriate compliance services. Total compliance fees were $221,000 and $360,000 for 2005 and 2004, respectively. Tax fees also include tax advice and tax planning fees of $9,000 and $56,000 for fiscal 2005 and 2004, respectively. | |
(d) | All other fees includes online research tools and other services. |
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Amount and Nature of | ||||||||
Beneficial Ownership | ||||||||
Name or Group of Beneficial Owners | Number of Shares | Percentage Owned (%) | ||||||
Entities Controlled by Capital Group International, Inc.(1) | 26,875,480 | 13.82 | ||||||
Entities Controlled by CAM North America, LLC(2) | 14,783,060 | 7.60 | ||||||
Judy Bruner(3) | 190,524 | * | ||||||
Yoram Cedar(4) | 246,740 | * | ||||||
Nelson Chan(5) | 300,010 | * | ||||||
Irwin Federman(6) | 116,994 | * | ||||||
Steven J. Gomo(7) | 25,000 | * | ||||||
Dr. Eli Harari(8) | 5,572,394 | 2.86 | ||||||
Eddy W. Hartenstein(9) | 25,000 | * | ||||||
Catherine P. Lego(10) | 433,298 | * | ||||||
Michael E. Marks(11) | 134,250 | * | ||||||
Sanjay Mehrotra(12) | 557,366 | * | ||||||
Dr. James D. Meindl(13) | 118,514 | * | ||||||
Alan F. Shugart(14) | 38,250 | * | ||||||
All directors and current executive officers as a group (13 persons)(15) | 7,759,840 | 3.99 |
* | Less than 1% of the outstanding Common Stock. |
(1) | The principal address of Capital Group International, Inc. (“CGII”) is 11100 Santa Monica Blvd., Los Angeles, California, 90025. Pursuant to a joint Schedule 13G/ A filed with the SEC on February 9, 2006 by and on behalf of Capital Guardian Trust Company (“CGTC”) and Capital International Limited (“CIL”), CGII reported that it had sole voting power over 21,790,100 shares of Common Stock and sole dispositive power over 26,875,480 shares of Common Stock, CGTC reported that it had sole voting power over 8,049,500 shares of Common Stock and sole dispositive power over 10,690,800 shares of Common Stock, and CIL reported that it had sole voting power over 7,670,400 shares of Common Stock and sole dispositive power over 9,214,880 shares of Common Stock. Each of the above entities has disclaimed beneficial ownership of such shares of Common Stock pursuant to Rule 13d-4 under the Securities Exchange Act of 1934, as amended. | |
(2) | The principal address of CAM North America, LLC (“CAM”) is 399 Park Avenue, New York, New York, 10022. Pursuant to a joint Schedule 13G filed with the SEC February 15, 2006 by and on behalf of CAM, Salomon Brothers Asset Management Inc. (“SBAM”), Smith Barney Fund Management LLC (“SBFM”), and TIMCO Asset Management Inc. (“TIMCO”), CAM reported that it had shared voting power over 8,403,368 shares of Common Stock and shared dispositive power over 10,113,616 shares of Common Stock, SBAM reported that it had shared voting and dispositive power over 618,352 shares of Common Stock, SBFM reported that it had shared voting and dispositive power over 4,036,380 shares of Common Stock, and TIMCO reported that it had shared voting and dispositive power over 14,712 shares of Common Stock. | |
(3) | Comprised of 5,400 shares held as community property in the name of Ms. Bruner and her husband, 153,124 shares subject to outstanding option granted to Ms. Bruner, which were exercisable on March 10, 2006 or within 60 days after that date, and 32,000 shares subject to immediately exercisable options granted to Ms. Bruner, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. |
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(4) | Includes 9,046 shares held in the name of a trust for the benefit of Mr. Cedar and his spouse. Also includes 235,125 shares subject to outstanding options granted to Mr. Cedar, which were exercisable on March 10, 2006 or within 60 days after that date. | |
(5) | Includes 293,748 shares subject to outstanding options owned by Mr. Chan, which were exercisable on March 10, 2006 or within 60 days after that date. Also includes 10 shares owned by Mr. Chan’s spouse and 393 shares subject to outstanding options granted to Mr. Chan’s spouse, which were exercisable on March 10, 2006 or within 60 days after that date. Mr. Chan disclaims beneficial ownership of the securities held by his spouse. | |
(6) | Includes 38,250 shares subject to immediately exercisable options granted to Mr. Federman, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. | |
(7) | Includes 25,000 shares subject to immediately exercisable options granted to Mr. Gomo, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. | |
�� | ||
(8) | Includes 3,018,663 shares held in the name of a trust for the benefit of Dr. Harari and his spouse. Also includes 2,328,702 shares subject to outstanding options granted to Dr. Harari, which were exercisable on March 10, 2006, or within 60 days after that date. Also includes 45,332 shares owned directly by his son and 161,972 shares held in the name of a trust for the benefit of his children. | |
(9) | Includes 25,000 shares subject to immediately exercisable options granted to Mr. Hartenstein, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. |
(10) | Includes 303,580 shares held in the name of a trust of which Ms. Lego is co-trustee. Also includes 124,250 shares subject to immediately exercisable options granted to Ms. Lego, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. |
(11) | Includes 5,000 shares held in the name of a trust for the benefit of Mr. Marks and his spouse, 15,000 shares held by a limited liability company controlled by Mr. Marks, 6,000 shares held in the name of a trust for the benefit of his son and 6,000 shares held in the name of a trust for the benefit of his daughter. Also includes 102,250 shares subject to immediately exercisable options granted to Mr. Marks, but some of the shares subject to those options would, if exercised, be subject to a repurchase right of the Company that lapses over time. |
(12) | Includes 32,558 shares held in the name of a trust for the benefit of Mr. Mehrotra and his spouse. Also includes 524,808 shares subject to outstanding options granted to Mr. Mehrotra, which were exercisable on March 10, 2006 or within 60 days after that date. |
(13) | Comprised of 48,264 shares held as community property in the name of Dr. Meindl and his spouse and 70,250 shares subject to immediately exercisable options granted to Dr. Meindl, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. |
(14) | Comprised of 38,250 shares subject to immediately exercisable options granted to Mr. Shugart, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. |
(15) | Includes shares subject to options exercisable within 60 days after March 10, 2006, including those identified in notes (3), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13) and (14). |
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(A) | (B) | (C) | ||||||||||
Number of Securities | ||||||||||||
Number of Securities | Remaining Available | |||||||||||
to be Issued | Weighted Average | for Future Issuance | ||||||||||
Upon Exercise of | Exercise Price of | Under Equity Compensation | ||||||||||
Outstanding Options | Outstanding | Plans (Excluding Securities | ||||||||||
Plan Category | and Rights | Options(1) | Reflected in Column A) | |||||||||
Equity Compensation Plans Approved by Stockholders(2) | 21,925,083 | (3)(4)(5) | $ | 29.15 | 5,452,691 | (7) | ||||||
Equity Compensation Plans Not Approved by Stockholders | N/A | N/A | N/A | |||||||||
Total | 21,925,083 | (4)(6) | $ | 29.15 | 5,452,691 | |||||||
(1) | Weighted average exercise price of outstanding options; excludes restricted stock units. |
(2) | Consists solely of the 2005 Plan, including options incorporated from predecessor plans, the 2005 Employee Stock Purchase Plan, the 2005 International Employee Stock Purchase Plan (together with the 2005 Employee Stock Purchase Plan, the “Purchase Plans”). |
(3) | Excludes purchase rights accruing under the Company’s Purchase Plans, which have a combined stockholder-approved reserve of 5,000,000 shares. Under the Purchase Plans, each eligible employee may purchase up to 1,500 shares of Common Stock at the end of each six-month offering period (the last U.S. business day in January and July each year) at a purchase price per share equal to 85% of the lower of (i) the closing selling price per share of Common Stock on the employee’s entry date into thatsix-month offering period or (ii) the closing selling price per share on the purchase date. |
(4) | Excludes 253,164 shares subject to outstanding options with a weighted average exercise price of $6.62 and a weighted average estimated remaining life of 8.46 years and 139,338 shares subject to outstanding restricted stock units under equity compensation plans or arrangements assumed by the Company in connection with its acquisition of Matrix Technologies, Inc., which had originally granted those options and restricted stock units. |
(5) | Includes 5,386,297 shares subject to options and 254,334 shares subject to restricted stock units outstanding under the 2005 Plan. Also includes 16,284,452 shares subject to outstanding options under predecessor plans. |
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(6) | Weighted average estimated remaining life of the outstanding options is 7.00 years. |
(7) | Consists of shares available for future issuance under the 2005 Plan and the Purchase Plans. As of March 10, 2006, 566,600 shares of Common Stock were available for issuance under the 2005 Plan and 4,886,091 shares of Common Stock were available for issuance under the combined share reserve for the Purchase Plans. |
Long-Term | All Other | ||||||||||||||||||||
Annual Compensation | Compensation Awards | Compensation | |||||||||||||||||||
Underlying | Securities | ||||||||||||||||||||
Name & Principal Position | Years | Salary ($)(1) | Bonus ($)(2) | Options (#) | ($) | ||||||||||||||||
Dr. Eli Harari | 2005 | 721,873 | 1,740,000 | 400,000 | 6,300 | (4) | |||||||||||||||
President, Chief Executive | 2004 | 618,982 | 1,440,000 | 600,000 | 6,150 | (4) | |||||||||||||||
Officer, Director(3) | 2003 | 538,491 | 1,000,000 | 400,000 | 6,000 | (4) | |||||||||||||||
Sanjay Mehrotra | 2005 | 421,768 | 858,235 | 300,000 | 6,300 | (4) | |||||||||||||||
Executive Vice President & | 2004 | 358,083 | 625,000 | 375,000 | 6,145 | (4) | |||||||||||||||
Chief Operating Officer(3) | 2003 | 318,148 | 500,000 | 250,000 | 6,000 | (4) | |||||||||||||||
Judy Bruner(5) | 2005 | 363,937 | 653,249 | 125,000 | 0 | ||||||||||||||||
Executive Vice President, | 2004 | 176,208 | 325,000 | 450,000 | (6) | 0 | |||||||||||||||
Administration & CFO | |||||||||||||||||||||
Nelson Chan | 2005 | 363,634 | 600,000 | 150,000 | (7) | 6,300 | (4) | ||||||||||||||
Executive Vice President, | 2004 | 320,491 | 500,000 | 300,000 | (7) | 6,150 | (4) | ||||||||||||||
Consumer Products & Corporate Marketing | 2003 | 276,404 | 400,000 | 150,000 | 6,000 | (4) | |||||||||||||||
Yoram Cedar | 2005 | 320,299 | 500,000 | 230,000 | 6,300 | (4) | |||||||||||||||
Executive Vice President, | 2004 | 264,334 | 400,000 | 200,000 | 6,150 | (4) | |||||||||||||||
Handset Business & Corporate Engineering | 2003 | 237,558 | 250,000 | 100,000 | 5,163 | (4) |
(1) | Includes salary deferral contributions to the Company’s 401(k) Plan. |
(2) | Bonus earned for the year indicated but paid in the following year. |
(3) | Effective June 1, 2006, Dr. Harari’s title will be Chief Executive Officer and Chairman of the Board of Directors and Mr. Mehrotra’s title will be President and Chief Operating Officer. |
(4) | Company paid 401(k) match. |
(5) | Ms. Bruner joined the Company as an executive officer on June 21, 2004. |
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(6) | Excludes 32,000 option shares granted on May 20, 2004 in connection with Ms. Bruner’s service as a member of the Board of Directors. This grant was subsequently cancelled when Ms. Bruner resigned from the Board in July 2004. |
(7) | Does not include option shares granted to Mr. Chan’s spouse, an employee of the Company, in the amount of 1,950 shares in 2005 and 2,800 shares in 2004. Mr. Chan disclaims any beneficial ownership of the options held by his spouse. |
Potential Realizable | ||||||||||||||||||||||||
Value at Assumed Annual | ||||||||||||||||||||||||
Rates of Stock Price | ||||||||||||||||||||||||
Number of | % of Total Options | Appreciation for Option | ||||||||||||||||||||||
Securities | Granted to | Term(5) | ||||||||||||||||||||||
Underlying Options | Employees in | Exercise Price | ||||||||||||||||||||||
Name | Granted(1)(2) | Fiscal Year(3) | ($/Sh)(4) | Expiration Date | 5% ($) | 10% ($) | ||||||||||||||||||
Dr. Eli Harari | 200,000 | 3.17 | 24.18 | 1/2/2015 | 3,040,282 | 7,704,064 | ||||||||||||||||||
200,000 | 3.17 | 26.09 | 5/26/2012 | 2,124,250 | 4,950,406 | |||||||||||||||||||
Sanjay Mehrotra | 300,000 | 4.75 | 24.18 | 1/2/2015 | 4,560,422 | 11,556,095 | ||||||||||||||||||
Judy Bruner | 125,000 | 1.98 | 24.18 | 1/2/2015 | 1,900,176 | 4,815,040 | ||||||||||||||||||
Nelson Chan(6) | 150,000 | 2.38 | 24.18 | 1/2/2015 | 2,280,211 | 5,778,048 | ||||||||||||||||||
Yoram Cedar | 150,000 | 2.38 | 24.18 | 1/2/2015 | 2,280,211 | 5,778,048 | ||||||||||||||||||
80,000 | 1.27 | 44.79 | 9/22/2012 | 1,458,722 | 3,399,443 |
(1) | The grant dates for the listed options were January 3, 2005, May 27, 2005 and September 23, 2005. Each of the listed options will become exercisable for 25% of the option shares upon the optionee’s continuation in service through the one year anniversary of the grant date and will become exercisable for the remaining shares in a series of twelve (12) successive quarterly installments upon the optionee’s completion of each additional three (3)-month period of service with the Company over the36-month period measured from the one year anniversary date. |
(2) | Each option will become immediately exercisable for all the option shares upon an acquisition of the Company by merger or asset sale, unless the option is assumed or replaced by the acquiring entity. Each option granted prior to May 27, 2005 (and expiring before May 26, 2015) has a maximum term of ten (10) years and each option granted on or after May 27, 2005 (and expiring on or after May 26, 2015) has a maximum term of seven (7) years, subject to earlier termination in the event of the optionee’s cessation of service with the Company. Each option includes a limited stock appreciation right that will allow the optionee, upon the acquisition of 50% or more of the Company’s outstanding voting stock pursuant to a hostile tender offer, to surrender that option to the Company, to the extent the option is at the time exercisable for vested shares, in exchange for a cash distribution based on the tender offer price. |
(3) | The Company granted options to purchase 6,310,668 shares of Common Stock to all employees during fiscal 2005. |
(4) | The exercise price may be paid in cash, in shares of the Company’s Common Stock valued at fair market value on the exercise date, or the extent permissible under applicable law and Company policy, through a cashless exercise procedure involving a same day sale of the purchased shares. |
(5) | Potential gains are net of exercise price, but before taxes associated with exercise. There is no assurance that the actual stock price appreciation over the option term will be at the assumed 5% and 10% levels of assumed annual rates of compounded stock price appreciation or at any other defined level. Unless the |
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market price of the Common Stock appreciates over the option term, no value will be realized from the option grants made to the executive officers. | |
(6) | Does not include options for 1,950 shares granted to Mr. Chan’s spouse, an employee of the Company. Mr. Chan disclaims beneficial ownership of the options held by his spouse. |
Number of Securities | Value of Unexercised | |||||||||||||||||||||||
Underlying Unexercised | In-the-Money Options at | |||||||||||||||||||||||
Number of Shares | Options at FY-End (#) | FY-End ($)(2) | ||||||||||||||||||||||
Acquired on | Aggregate Value | |||||||||||||||||||||||
Name | Exercise (#) | Realized ($)(1) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Dr. Eli Harari | 417,014 | 15,656,125 | 2,453,702 | 1,000,000 | 123,627,235 | 38,964,750 | ||||||||||||||||||
Sanjay Mehrotra | 415,000 | 12,506,277 | 622,621 | 602,189 | 35,760,329 | 22,930,069 | ||||||||||||||||||
Judy Bruner | 171,000 | 3,916,400 | 125,750 | 406,250 | 5,814,485 | 16,839,375 | ||||||||||||||||||
Nelson Chan(3) | 441,928 | 15,714,752 | 389,373 | 390,627 | 18,364,668 | 14,767,332 | ||||||||||||||||||
Yoram Cedar | 198,000 | 7,004,218 | 182,249 | 389,751 | 8,356,524 | 13,289,990 |
(1) | Equal to the fair market value of the shares at the time of acquisition over the option exercise price paid for those shares. |
(2) | Based on the fair market value of the Company’s Common Stock at December 30, 2005, the last trading day of the Company’s fiscal year which ended January 1, 2006, $62.82 per share (the closing selling price of the Company’s Common Stock on that date on the Nasdaq National Market), less the exercise price payable for such shares. |
(3) | Excludes option exercises and outstanding options held by Mr. Chan’s spouse, an employee of the Company. During fiscal 2005, Mr. Chan’s spouse acquired 3,425 shares of the Company’s Common Stock on exercise of stock options with an aggregate value realized of $101,204. As of the end of fiscal 2005, Mr. Chan’s spouse has no exercisable options and 4,275 shares underlying unexercisable options with an aggregate value of $160,043. Mr. Chan disclaims beneficial ownership with respect to these securities. |
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Submitted by the Audit Committee | |
of the Board of Directors | |
Catherine P. Lego, Ch. | |
Irwin Federman | |
Steven J. Gomo | |
Alan F. Shugart |
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Submitted by the Compensation Committee | |
of the Board of Directors | |
Alan F. Shugart, Ch. | |
Michael E. Marks | |
Dr. James D. Meindl |
• | a cash payment equal to the sum of (A) one times the officer’s annual base compensation at the time of the Change of Control or the time of termination, whichever annual base salary amount is greater, plus (B) the officer’s annual target bonus in effect for the year of the termination; | |
• | accelerated vesting of any Company equity awards that are outstanding and otherwise unvested at the time of the termination and up to one year after the termination to exercise any vested Company equity awards; | |
• | continued medical, disability, life and other insurance coverage for a period of 24 months after the termination; and | |
• | executive-level outplacement services, an office and administrative support for a period of 12 months after the termination. |
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BY ORDER OF THE BOARD OF DIRECTORS, | |
Eli Harari | |
President and Chief Executive Officer |
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I. | PURPOSE OF THE PLAN |
II. | STRUCTURE OF THE PLAN |
• | the Discretionary Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock or stock appreciation rights tied to the value of such Common Stock, | |
• | the Stock Issuance and Cash Bonus Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock pursuant to restricted stock awards, restricted stock units or other stock-based awards which vest upon the completion of a designated service period or the attainment of pre-established performance milestones, be awarded cash bonus opportunities which are earned through the attainment of pre-established performance milestones, or be issued shares of Common Stock through direct purchase or as a bonus for services rendered the Corporation (or any Parent or Subsidiary), and | |
• | the Automatic Grant Program under which eligible non-employee Board members will automatically receive grants at designated intervals over their period of continued Board service. |
III. | ADMINISTRATION OF THE PLAN |
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IV. | ELIGIBILITY |
(i) Employees, | |
(ii) non-employee members of the Board or the board of directors of any Parent or Subsidiary, and | |
(iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). |
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V. | STOCK SUBJECT TO THE PLAN; ANNUAL CASH LIMITATION |
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I. | OPTION TERMS |
(i) cash or check made payable to the Corporation, | |
(ii) shares of Common Stock held for the requisite period (if any) necessary to avoid any resulting charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or | |
(iii) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide instructions to (a) a brokerage firm (reasonably satisfactory to the Corporation for purposes of administering such procedure in compliance |
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with the Corporation’s pre-clearance/pre-notification policies) to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm on such settlement date in order to complete the sale. |
(i) Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term. | |
(ii) Any option held by the Optionee at the time of the Optionee’s death and exercisable in whole or in part at that time may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option. | |
(iii) Should the Optionee’s Service be terminated for Misconduct or should the Optionee otherwise engage in Misconduct while holding one or more outstanding options granted under this Article Two, then all of those options shall terminate immediately and cease to be outstanding. | |
(iv) During the applicable post-Service exercise period, the option may not be exercised for more than the number of vested shares for which the option is at the time exercisable. No additional shares shall vest under the option following the Optionee’s cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to an express written agreement with the Optionee. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any shares for which the option has not been exercised. |
(i) extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, | |
(ii) include an automatic extension provision whereby the specified post-Service exercise period in effect for any option granted under this Article Two shall automatically be extended by an additional period of time equal in duration to any interval within the specified post-Service exercise period during which the exercise of that option or the immediate sale of the shares acquired under such option could not be effected in compliance with applicable federal and state securities laws, but in no event shall such an extension result in the continuation of such option beyond the expiration date of the term of that option, and/or |
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(iii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested had the Optionee continued in Service. |
(i) Incentive Options: During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death. | |
(ii) Non-Statutory Options. Non-Statutory Options shall be subject to the same limitation on transfer as Incentive Options, except that the Plan Administrator may structure one or more Non-Statutory Options so that the option may be assigned in whole or in part during the Optionee’s lifetime to one or more Family Members of the Optionee or to a trust established exclusively for one or more such Family Members, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. | |
(iii) Beneficiary Designations. Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two (whether Incentive Options or Non-Statutory Options), and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death. |
II. | INCENTIVE OPTIONS |
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III. | STOCK APPRECIATION RIGHTS |
1. One or more individuals eligible to participate in the Discretionary Grant Program may be granted a Stand-alone Right not tied to any underlying option under this Discretionary Grant Program. The Stand-alone Right shall relate to a specified number of shares of Common Stock and shall be exercisable upon such terms and conditions as the Plan Administrator may establish. In no event, however, may the Stand-alone Right have a maximum term in excess of seven (7) years measured from the grant date. Upon exercise of the Stand-alone Right, the holder shall be entitled to receive a distribution from the Corporation in an amount equal to the excess of (i) the aggregate Fair Market Value (on the exercise date) of the shares of Common Stock underlying the exercised right over (ii) the aggregate base price in effect for those shares. |
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2. The number of shares of Common Stock underlying each Stand-alone Right and the base price in effect for those shares shall be determined by the Plan Administrator in its sole discretion at the time the Stand-alone Right is granted. In no event, however, may the base price per share be less than the Fair Market Value per underlying share of Common Stock on the grant date. In the event outstanding Stand-alone Rights are to be assumed in connection with a Change in Control transaction or otherwise continued in effect, the shares of Common Stock underlying each such Stand-alone Right shall be adjusted immediately after such Change in Control so as to apply to the number and class of securities into which those shares of Common Stock would have been converted in consummation of such Change in Control had those shares actually been outstanding at that time. Appropriate adjustments to reflect such Change in Control shall also be made to the base price per share in effect under each outstanding Stand-alone Right,provided the aggregate base price shall remain the same. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation may, in connection with the assumption or continuation of the outstanding Stand-alone Rights under the Discretionary Grant Program, substitute, for the securities underlying those assumed rights, one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in the Change in Control transaction. | |
3. Stand-alone Rights shall be subject to the same transferability restrictions applicable to Non-Statutory Options and may not be transferred during the holder’s lifetime, except if such assignment is in connection with the holder’s estate plan and is to one or more Family Members of the holder or to a trust established for the holder and/or one or more such Family Members or pursuant to a domestic relations order covering the Stand-alone Right as marital property. In addition, one or more beneficiaries may be designated for an outstanding Stand-alone Right in accordance with substantially the same terms and provisions as set forth in Section I.F of this Article Two. | |
4. The distribution with respect to an exercised Stand-alone Right shall be made in shares of Common Stock valued at Fair Market Value on the exercise date. | |
5. The holder of a Stand-alone Right shall have no stockholder rights with respect to the shares subject to the Stand-alone Right unless and until such person shall have exercised the Stand-alone Right and become a holder of record of the shares of Common Stock issued upon the exercise of such Stand-alone Right. |
IV. | CHANGE IN CONTROL/ HOSTILE TAKE-OVER |
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V. | PROHIBITION ON REPRICING PROGRAMS |
I. | STOCK ISSUANCE AND CASH BONUS TERMS |
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A. | Issue Price. |
1. The issue price per share shall be fixed by the Plan Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the issuance date. | |
2. Shares of Common Stock may be issued under the Stock Issuance and Cash Bonus Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: | |
(i) cash or check made payable to the Corporation, | |
(ii) past services rendered to the Corporation (or any Parent or Subsidiary); or | |
(iii) any other valid consideration under the Delaware General Corporation Law. |
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II. | CHANGE IN CONTROL/ HOSTILE TAKE-OVER |
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I. | OPTION TERMS |
1. Initial Grant: Each individual who is first elected or appointed as a non-employee Board member at any time on or after the Plan Effective Date shall automatically be granted, on the date of such initial election or appointment, a Non-Statutory Option to purchase not more than one hundred fifty thousand (150,000) shares of Common Stock, provided that individual has not been in the employ of the Corporation or any Parent or Subsidiary during the immediately preceding twelve (12) months. The actual number of shares for which such initial option grant shall be made shall (subject to the150,000-share limit) be determined by the Plan Administrator at the time of each such grant. | |
2. Annual Grants: On the date of each annual stockholders meeting, beginning with the 2005 Annual Meeting, each individual who is to continue to serve as a non-employee Board member, whether or not that individual is standing for re-election to the Board at that particular annual meeting, shall automatically be granted a Non-Statutory Option to purchase not more than forty thousand (40,000) shares of Common Stock, provided that such individual has served as a non-employee Board member for a period of at least six (6) months. There shall be no limit on the number of such annual share option grants any one continuing non-employee Board member may receive over his or her period of Board service, and non-employee Board members who have previously been in the employ of the Corporation (or any Parent or Subsidiary) shall be eligible to receive one or more such annual option grants over their period of continued Board service. The actual number of shares for which such annual option grants are made to each continuing non-employee Board member shall (subject to the40,000-share limit) be determined by the Plan Administrator on or before the date of the annual stockholders meeting on which those grants are to be made. |
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(i) The Optionee (or, in the event of Optionee’s death while holding the option, the personal representative of the Optionee’s estate or the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or the designated beneficiary or beneficiaries of such option) shall have a twelve (12)-month period following the date of such cessation of Service in which to exercise such option. | |
(ii) During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for which the option is exercisable at the time of the Optionee’s cessation of Service. However, should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise period following such cessation of Board service, be exercised for any or all of those shares as fully vested shares of Common Stock. | |
(iii) In no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service for any reason (other than cessation of Board service by reason of death or Permanent Disability), terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. |
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II. | CHANGE IN CONTROL/ HOSTILE TAKE-OVER |
III. | REMAINING TERMS |
IV. | ALTERNATIVE AWARDS |
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I. | TAX WITHHOLDING |
II. | SHARE ESCROW/ LEGENDS |
III. | EFFECTIVE DATE AND TERM OF THE PLAN |
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V. | USE OF PROCEEDS |
VI. | REGULATORY APPROVALS |
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VII. | NO EMPLOYMENT/ SERVICE RIGHTS |
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A. Annual Meetingshall mean the annual meeting of the Corporation’s stockholders. | |
B. Automatic Grant Programshall mean the automatic option grant program in effect under Article Four of the Plan. | |
C. Boardshall mean the Corporation’s Board of Directors. | |
D. Change in Controlshall mean a change in ownership or control of the Corporation effected through any of the following transactions: |
(i) a merger, consolidation or other reorganization approved by the Corporation’s stockholders,unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to such transaction, | |
(ii) a stockholder-approved sale, transfer or other disposition (including in whole or in part through one or more licensing arrangements) of all or substantially all of the Corporation’s assets, or | |
(iii) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a “group” within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Corporation or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Corporation) becomes directly or indirectly the beneficial owner (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing (or convertible into or exercisable for securities possessing) more than fifty percent (50%) of the total combined voting power of the Corporation’s securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Corporation or the acquisition of outstanding securities held by one or more of the Corporation’s existing stockholders. |
E. Codeshall mean the Internal Revenue Code of 1986, as amended. | |
F. Common Stockshall mean the Corporation’s common stock. | |
G. CompensationCommittee shall mean the Compensation Committee of the Board comprised of two (2) or more non-employee Board members. | |
H. Corporationshall mean SanDisk Corporation, a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of SanDisk Corporation which has by appropriate action assumed the Plan. | |
I.Discretionary Grant Programshall mean the discretionary grant program in effect under Article Two of the Plan pursuant to which stock options and stock appreciation rights may be granted to one or more eligible individuals. | |
J. Employeeshall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary, whether now existing or subsequently established), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. | |
K. Exercise Dateshall mean the date on which the Corporation shall have received written notice of the option exercise. |
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L. Fair Market Valueper share of Common Stock on any relevant date shall be determined in accordance with the following provisions: |
(i) If the Common Stock is at the time traded on the NASDAQ National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after- hours trading begins) on the NASDAQ National Market on the date in question, as such price is reported by the National Association of Securities Dealers. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. | |
(ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. |
M. Family Membermeans, with respect to a particular Optionee or Participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,mother-in-law,father-in-law,son-in-law,daughter-in-law,bother-in-law orsister-in-law. | |
N. Hostile Take-Overshall mean a change in ownership or control of the Corporation effected through either of the following transactions: |
(i) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination, or | |
(ii) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders which the Board does not recommend such stockholders to accept. |
O. Incentive Optionshall mean an option which satisfies the requirements of Code Section 422. | |
P. Involuntary Terminationshall mean the termination of the Service of any individual which occurs by reason of: |
(i) such individual’s involuntary dismissal or discharge by the Corporation (or any Parent or Subsidiary) for reasons other than Misconduct, or | |
(ii) such individual’s voluntary resignation following (A) a change in his or her position with the Corporation (or any Parent or Subsidiary) which materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation (or any Parent or Subsidiary) without the individual’s consent. |
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Q. Misconductshall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to discharge or dismiss any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct. | |
R. 1934 Actshall mean the Securities Exchange Act of 1934, as amended. | |
S. Non-Statutory Optionshall mean an option not intended to satisfy the requirements of Code Section 422. | |
T. Optioneeshall mean any person to whom an option is granted under the Discretionary Grant or Automatic Grant Program. | |
U. Parentshall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. | |
V. Participantshall mean any person who is issued shares of Common Stock or restricted stock units or other stock-based awards or cash bonus awards under the Stock Issuance and Cash Bonus Program. | |
W. Permanent Disability or Permanently Disabledshall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic Grant Program, Permanent Disability or Permanently Disabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. | |
X. Planshall mean the Corporation’s 2005 Stock Incentive Plan, as set forth in this document. | |
Y. Plan Administratorshall mean the particular entity, whether the Compensation Committee, the Board or the Secondary Board Committee, which is authorized to administer the Discretionary Grant Program and Stock Issuance and Cash Award Program with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction. | |
Z. Plan Effective Dateshall mean the May 27, 2005 date on which the Plan is approved by the stockholders at the 2005 Annual Meeting. | |
AA. Predecessor Plansshall mean (i) the Corporation’s 1995 Stock Option Plan and (ii) the Corporation’s 1995 Non-Employee Directors Stock Option Plan, as each such Plan is in effect immediately prior to the 2005 Annual Stockholders Meeting. | |
BB. Secondary Board Committeeshall mean a committee of one or more Board members appointed by the Board to administer the Discretionary Grant and Stock Issuance and Cash Bonus Programs with respect to eligible persons other than Section 16 Insiders. | |
CC. Section 16 Insidershall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. | |
DD. Serviceshall mean the performance of services for the Corporation (or any Parent or Subsidiary, whether now existing or subsequently established) by a person in the capacity of an |
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Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. For purposes of the Plan, an Optionee or Participant shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) the Optionee or Participant no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary or (ii) the entity for which the Optionee or Participant is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee or Participant may subsequently continue to perform services for that entity. Service shall not be deemed to cease during a period of military leave, sick leave or other personal leave approved by the Corporation; provided,however, that should such leave of absence exceed three (3) months, then for purposes of determining the period within which an Incentive Option may be exercised as such under the federal tax laws, the Optionee’s Service shall be deemed to cease on the first day immediately following the expiration of such three (3)-month period, unless Optionee is provided with the right to return to Service following such leave either by statute or by written contract. Except to the extent otherwise required by law or expressly authorized by the Plan Administrator or by the Corporation’s written policy on leaves of absence, no Service credit shall be given for vesting purposes for any period the Optionee or Participant is on a leave of absence. | |
EE. Stock Exchangeshall mean either the American Stock Exchange or the New York Stock Exchange. | |
FF. Stock Issuance Agreementshall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance and Cash Bonus Program. | |
GG. Stock Issuance and Cash Bonus Programshall mean the stock issuance and cash bonus program in effect under Article Three of the Plan. | |
HH. Subsidiaryshall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. | |
II. 10% Stockholdershall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). | |
JJ. Withholding Taxesshall mean the applicable income and employment withholding taxes to which the holder of an option or stock appreciation right or shares of Common Stock or a cash bonus under the Plan may become subject in connection with the grant or exercise of those options or stock appreciation rights the issuance or vesting of those shares or the payment of such cash bonus. |
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ONE: They are the duly elected and acting President and Secretary, respectively, of said corporation. | |
TWO: The Amended and Restated Certificate of Incorporation of said corporation, filed on November 13, 1995, as amended by the Certificate of Designations of said corporation, filed on April 24, 1997, as amended by the Certificate of Amendment of said corporation filed on December 13, 1999 and as amended by the Certificate of Amendment of said corporation filed on May 11, 2000 shall be amended as set forth in this Certificate of Amendment. | |
THREE: Section A of ARTICLE IV of the Amended and Restated Certificate of Incorporation is amended to read in its entirety as follows: |
“A.Classes of Stock. This corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares that the corporation is authorized to issue is Eight Hundred Four Million (804,000,000) shares, par value $0.001 per share. Eight Hundred Million (800,000,000) shares shall be Common Stock and Four Million (4,000,000) shares shall be Preferred Stock.” |
FOUR: The foregoing Certificate of Amendment has been duly approved by the Board of Directors of the Corporation. | |
FIVE: The foregoing Certificate of Amendment has been duly approved by the requisite number of shares of the Corporation in accordance with Section 242 of the Delaware General Corporation Law. The total number of shares entitled to vote with respect to the foregoing amendment was 194,590,630 shares of Common Stock. The number of shares voting in favor of the foregoing amendment equaled or exceeded the vote required, such required vote being a majority of the outstanding shares of Common Stock. No shares of Preferred Stock are outstanding. |
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Eli Harari | |
President | |
Charles Van Orden | |
Secretary |
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THIS PROXY IS SOLICITED ON BEHALF OF SANDISK CORPORATION’S BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 25, 2006.
Eli Harari and Charles Van Orden, or either of them, are hereby appointed as the lawful agents and proxies of the undersigned (with all powers the undersigned would possess if personally present, including full power of substitution and resubstitution) to represent and to vote all shares of Common Stock of SanDisk Corporation (the “Company”) which the undersigned is entitled to vote at the Company’s Annual Meeting of Stockholders to be held on May 25, 2006 at 8:00 a.m., local time, and at any adjournments or postponements thereof, as follows:
The Board of Directors recommends a vote FOR the election of Directors and FOR proposals 2, 3 and 4. This proxy will be voted as directed, or, if no direction is indicated, will be voted FOR each of the proposals and, at the discretion of the persons named as proxies, upon such other matters as may properly come before the meeting or any postponement or adjournment thereof. This proxy may be revoked at any time before it is voted.
(Continued and to be voted on reverse side.)
Telephone and Internet Voting Instructions
• | Call toll free 1-800-652-VOTE (8683) in the United States or Canada any time on a touch tone telephone. There isNO CHARGEto you for the call. | |||
• | Follow the simple instructions provided by the recorded message. |
• | Go to the following web site: | |||
WWW.COMPUTERSHARE.COM/EXPRESSVOTE | ||||
• | Enter the information requested on your computer screen and follow the simple instructions. |
C0123456789
12345
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be received by 5:30 p.m., Central Daylight Time on May 24, 2006.
THANK YOU FOR VOTING
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SanDisk Corporation
MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 |
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o | Mark this box with an X if you have made changes to your name or address details above. |
1. | The Board of Directors recommends a vote “FOR” the election of the Nominees listed below. |
For | Withhold | For | Withhold | |||||||||
01 - Dr. Eli Harari | o | o | 04 - Eddy W. Hartenstein | o | o | |||||||
02 - Irwin Federman | o | o | 05 - Catherine P. Lego | o | o | |||||||
03 - Steven J. Gomo | o | o | 06 - Michael E. Marks | o | o | |||||||
07 - Dr. James D. Meindl | o | o |
B Issues
For | Against | Abstain | ||||||
2. | To approve amendments to the Company’s 2005 Incentive Plan. | o | o | o | ||||
3. | To approve an amendment to the Company’s Certificate of Incorporation, increasing the authorized amount of Common Stock from 400,000,000 shares to 800,000,000 shares. | o | o | o |
For | Against | Abstain | ||||||
4. | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2006. | o | o | o |
n | 1 U P X H H H P P P P 0052011 |